LONDON: German government bonds fell at Thursday's open with European shares set for a third session of gains after positive earnings surprises pushed a US stock index to its highest in almost three years. But Bund losses were contained and 10-year German yields remain almost 20 basis points below last week's highs, propped up by fears that Greece will have to restructure its debt which have driven yields on Greek, Irish and Portuguese bonds to new highs.
"As long as uncertainty prevails, Bunds should maintain their underlying bid, withstanding an otherwise larger pull effect from rallying equities," said Commerzbank rate strategist Christoph Rieger.
June Bund futures were 18 ticks lower at 121.76.
Two-year bond yields were almost a basis point higher at 1.843 percent, with 10-year yields up almost 2 basis points at 3.324 percent.
Trading volumes were set to be thin ahead of the Easter break.
France will auction up to 8.5 billion euros of 2013, 2015 and 2016 conventional bonds.
"The bonds look reasonably priced on the domestic curve, particularly the 5-year, and should therefore be met with decent demand. The risk is that investor interest could be blunted due to the Easter period," said Credit Agricole rate strategist Orlando Green.
France will also sell up to 2 billion euros of 2019, 2022 and 2040 inflation linked bonds.
Robust results from Apple Inc and upbeat outlooks from other US manufacturers gave US stocks their best session in a month overnight.
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